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3 signs the vicious stock market rout could be nearing an end

Good news for investors with bruised egos right now: there is a bit of holiday cheer buried in the rubble that has become the end of year stock market.

One just needs to know where to look.

“Valuations continue to improve and there are many more cheaper stocks,” points out Jefferies strategist Steven DeSanctis.

Yahoo Finance sniffs out several other emerging trends in a market that has surprised most by tanking 8% in the past three months. Taken together, there is some reason to believe a Santa Claus rally could be in the cards.

Strong holiday sales

Shoppers flood a Walmart store on Black Friday.

The growing number of Wall Street number crunchers fearing a 2019 U.S. recession — and marking stocks down in the process — should comb the sales data from Black Friday. Not only is the takeaway that the U.S. consumer is doing just fine, but they are doing more than fine amid rising wages and a strong jobs market.

Final Thanksgiving Day sales totaled $3.7 billion, up 28% year-over-year. Thanksgiving Day also represented the first time $1 billion in sales from smartphones was seen.

Black Friday saw retailers haul in $6.2 billion in online sales, an increase of 23.6% from a year ago. The tally marked a new record, according to Adobe Analytics.

Cyber Monday is on track for a $7.8 billion sales day says Adobe Analytics, an increase of 18.3% year-over-year. That would make Cyber Monday 2018 the biggest online shopping day in U.S. history.

Macy’s CEO Jeff Gennette told Yahoo Finance the shopping season started on a strong note. He expects Macy’s mobile sales to reach $1 billion in 2018.

What recession?

Important stocks stage rebound

Here come those housing stocks.

The stocks that have led the market down since the fall — interest-rate sensitive sectors and tech high-flyers — have started to rebound. For instance, the SPDR S&P Homebuilder ETF has rallied 7% in the past month. It’s still down 22% this year as investors fret about inventory shortages in housing and the impact to demand from rising interest rates.

Meanwhile, the small-cap Russell 2000 has out-performed the S&P 500 by roughly 200 basis points in the past month. The Russell is now lower by 3% on the year. Even the battered Philadelphia Semiconductor Index has perked up to the tune of 3.5% over the past four weeks.

These are important signals that at least in the short-term, the market has found a bottom.

The defensive trade runs its course

Defensive trades unwind.

During the market’s turbulent fall stretch, investors have flocked to defensive stocks. Three names in particular — Coca-Cola, Proctor & Gamble and Verizon (parent company of Yahoo Finance) — have been top-performers.

But those stocks have lost 3% or so on average the past five sessions. Judging by the bullish moves in homebuilders and semiconductors, it would appear investors are on the prowl for bargains… and will use profits made in defensive trades to pull the trigger.

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Brian Sozzi is an editor-at-large at Yahoo Finance. Follow him on Twitter @BrianSozzi